Stablecoins: When the Dollar, U.S. Treasuries, and Digital Finance Begin to Connect

If a few years ago the discussion about digital currencies was easily understood as a technological race—who would launch a central bank digital currency first, whose blockchain was more advanced, whose payment speed was faster, and who could bypass the traditional banking system for cross-border settlements—by 2026, after the first round of experiments with the digital yuan, dollar stablecoins, tokenized deposits, and tokenized government bonds, an increasingly worthy question to revisit is: in the competition of digital currencies, what is truly competing is the "digital" or the "currency"? I will introduce the different development paths of China and the U.S. in the field of currency digitization in two articles.

My conclusion is: Digital technology itself cannot create a strong currency, but it can very efficiently amplify the network effects that a strong currency originally possesses.

The development paths of digital currencies in China and the U.S. have been asymmetrical from the very beginning. China has chosen a typical central bank digital currency route, with the People's Bank of China promoting the construction of the digital yuan system.

As of now, the U.S. has not launched a retail digital dollar for the public. What has truly developed rapidly are private dollar stablecoins like USDT and USDC, as well as tokenized bank deposits, tokenized government bonds, and on-chain settlement systems.

As of April 2026, the total market value of global stablecoins is approximately $315 billion. More importantly, the BIS estimates that about 98% are denominated in U.S. dollars. This data is very important as it indicates that the blockchain era has not naturally led to so-called "de-dollarization". On the contrary, stablecoins are becoming a new channel for the dollar to enter the internet economy.

To understand why stablecoins are almost monopolized by the dollar, we can first set aside digital technology and look only at the traditional currency system. According to the IMF's COFER data, in the first quarter of 2026, the dollar accounted for 57.13% of the global allocated official foreign exchange reserves, while the yuan accounted for 1.99%.

If we look at foreign exchange transactions, the gap is even more apparent. The BIS's three-year survey in 2025 shows that the dollar appeared on the side of 89.2% of global foreign exchange transactions, while the yuan rose to 8.5%, becoming the fifth largest trading currency globally. It should be noted that since a foreign exchange transaction involves two currencies, the sum of the shares of each currency is 200%, and it cannot be simply understood as "89.2% of transactions only used the dollar".

In July 2026, the dollar accounted for approximately 50.99% of SWIFT global payment amounts, while the yuan accounted for about 3.10%, ranking fifth. SWIFT's official Global Currency Tracker released this monthly data in August 2026.

A reality that is hard to bypass is that USDT and USDC primarily inherit not the credit of blockchain, but the existing credit and usage network of the dollar. An overseas company is willing to accept USDC not primarily because it believes Circle has the most advanced blockchain technology in the world. It is willing to accept it because what it ultimately receives is a financial instrument that is pegged to the dollar at a 1:1 ratio, can be exchanged for dollars, and can purchase dollar-denominated assets.

In this sense: it is not stablecoins that created the international status of the dollar, but the international status of the dollar that created the most fertile soil for dollar stablecoins.

Although traditional dollars are already very powerful, they are not truly an "internet-native asset". The international flow of dollars still heavily relies on bank accounts, correspondent banks, compliance checks, business hours, and traditional financial market infrastructure.

Stablecoins and tokenized bank deposits change precisely this layer.

They can operate 24/7, can enter smart contracts, can automate settlements with on-chain financial assets, and can integrate the previously separate "asset leg" and "fund leg" into the same program.

This is not just theoretical. In May 2025, J.P. Morgan, Chainlink, and Ondo completed a cross-chain test: tokenized U.S. Treasuries and J.P. Morgan dollar deposits achieved real-time Delivery versus Payment.

It is important to note that the cash leg used here is not USDT or USDC, but dollar deposits within the J.P. Morgan system.

DTCC's experiment is even more intuitive. In summarizing its Great Collateral Experiment, DTCC stated that assets could move directly on-chain, rules were automatically executed, and the settlement process for some collateral was compressed from hours to seconds.

Therefore, the claim that "digital technology is just a gimmick" is clearly unfounded. The more accurate judgment should be: digital technology has not created the credit of the dollar, but is reducing the friction in the operation of the dollar system. And a currency that already possesses a huge network effect, once the operational friction decreases further, its original advantages may be further amplified.

Let’s look again at how Wall Street is embracing tokenization.

Currently, what is truly being highly valued by large financial institutions is not just USDT or USDC. There are also tokenized bank deposits, tokenized central bank reserves, tokenized money market funds, tokenized government bonds, and new settlement infrastructures.

The Project Agorá led by the BIS is very representative.

This project brings together multiple central banks and over 40 financial institutions to test putting tokenized commercial bank deposits and tokenized central bank reserves into a programmable system for cross-border settlements, rather than simply using stablecoins to replace bank money.

In a real value test conducted in July 2026, 28 financial institutions and central banks completed 17 types of transaction scenarios involving currencies such as the dollar, euro, yen, pound, won, and Swiss franc. The average time from payment initiation to settlement was about 80 seconds.

This provides an important insight: the "digital currency" that Wall Street will truly use in the future may not necessarily be the USDT or USDC we are familiar with today. The final form could very well be a coexistence of stablecoins, bank deposit tokens, central bank currencies, and tokenized financial assets. Therefore, the real revolution should be called not the "stablecoin revolution," but rather the: revolution of tokenization of financial assets.

The trading volume of stablecoins is astonishing, but not all on-chain traffic can be called "payments".

This is another area where it is particularly easy to misjudge the scale of stablecoins. In 2025, the global on-chain trading volume of stablecoins reached approximately $35 trillion. $35 trillion is an extremely large number. However, the Bank for International Settlements further estimates that the actual "payment-related" stablecoin flow is only about $390 billion.

Why is there such a large gap between the two? Because the on-chain stablecoin flow largely comes from: cryptocurrency trading, exchange deposits and withdrawals, arbitrage, high-frequency trading, DeFi operations, smart contract calls, and internal fund transfers within institutions. After Visa and institutions like Artemis and Allium Labs adopted filtering algorithms, they estimated that the "adjusted" stablecoin trading scale over the past 12 months was approximately $10.2 trillion, still far below the unadjusted total flow; while about 36% of the adjusted flow in 2025 was still related to deposits and withdrawals at centralized exchanges.

On the other hand, stablecoins are indeed entering real commercial payments. Artemis surveyed 22 stablecoin payment companies and, after estimating an additional 11 companies, found that between 2023 and August 2025, the clearly categorized stablecoin payments totaled approximately $136 billion. Among them, the annualized scale of B2B stablecoin payments reached about $76 billion in August 2025.

Therefore, a more objective conclusion is: stablecoin payments are growing rapidly, but the claim that "stablecoins have taken over global payments and Wall Street settlements" is currently clearly an exaggeration.

The technological trend is real. The scale revolution has not yet fully occurred.

If there is one thing about the digital dollar that deserves attention, I believe it is not whether "you can use USDC to buy coffee". Rather, it is U.S. Treasuries.

Currently, the reserves of large dollar stablecoin issuers are increasingly composed of short-term U.S. Treasuries, repos, and cash. For example, according to Tether's report published and verified by BDO for the fourth quarter of 2025, as of the end of 2025: Tether directly held over $122 billion in U.S. Treasuries; if including overnight repos and other indirect exposures, the total exposure to U.S. Treasuries exceeds $141 billion. Tether also disclosed that by the end of 2025, the circulation of USDT was approximately $186 billion. (It must be noted that this is data disclosed by Tether and its verification agency, and not a government audit of Tether's balance sheet by the U.S. Treasury.)

Circle's situation is similar. Circle disclosed that USDC reserves include bank deposits, overnight U.S. Treasury repos, and U.S. Treasuries with maturities of less than three months; among them, the Circle Reserve Fund is managed by BlackRock.

What truly changes the game is the U.S. regulatory system. The GENIUS Act signed on July 18, 2025, stipulates that compliant payment stablecoins must, in principle, have 1:1 reserve backing, with allowable reserve assets including cash, bank deposits, repos, and high liquidity assets such as U.S. Treasuries with remaining maturities of no more than 93 days.

Thus, a previously non-existent financial cycle is forming:
Global users purchase dollar stablecoins
→ Stablecoin issuers obtain dollars
→ A large amount of reserves enters the short-term U.S. Treasury and repo market
→ U.S. Treasuries provide reserve assets for stablecoins
→ Stablecoins further distribute dollars to the global internet
→ More stablecoin demand may generate new U.S. Treasury demand.

This is no longer just a payment innovation; it is evolving into a new connector between the global dollar network and the U.S. Treasury market.

Therefore, the rise of dollar stablecoins today cannot simply be attributed to blockchain technology, nor can it be simply explained as "because the dollar is already strong".

What is truly happening is something else: the monetary advantages of the dollar, the asset advantages of U.S. Treasuries, and the liquidity advantages of U.S. financial markets are combining with new digital financial infrastructure.

This is the real significance of the digital dollar.

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